Spending to save: State commits $1.8 million to consultants

Gov. Matt Mead’s office this month signed a one-year, $1.8 million contract with management consulting firm Alvarez & Marsal, furthering a Legislature-driven effort to stem some of the state’s fiscal woes through streamlining state government.

Gov. Matt Mead’s office this month signed a one-year, $1.8 million dollar contract with management consulting firm Alvarez & Marsal, with elected officials hoping the expense will stem some of the state’s fiscal woes through streamlining state government.

The agreement is the second such deal between the state and the consulting giant. The Legislature first engaged the multinational corporation in 2017 to conduct an initial efficiency study at a cost of a little less than $300,000.

Supporters of the initiative believe — and A&M has reported — that the firm can save the state hundreds of millions by identifying inefficiencies in state operations and crafting fixes.

The contract calls for the consultants to establish a project management office in the state from which consultants will scour state agencies for cost savings. Along the way, they’ll train state employees to continue the work after they depart, according to a copy of A&M’s proposal.

Though the effort is broadly popular with sitting lawmakers and politicians seeking office, detractors say throwing money at private consultants is not the most “efficient” way for Wyoming to streamline its government.

One of the few lawmakers who has voted against the initiative, Rep. Tyler Lindholm (R-Sundance) said he worried about a consulting company whose first report had led to an opportunity to earn itself more fees.

“We just saw an extension of said consultant’s contract” Lindolm said. “It seems like it’s one of those never-ending monopoly type of situations … where it just seems like if you give us a little more money we’ll find you a little more.”

But supporters of the initiative said the project is structured for the executive branch to learn from A&M, and the state will likely be done with the consultants within a few years.

Alvarez & Marsal is a multinational consulting company.

“It’s important to have the knowledge transfer to people in the state,” said Senate Majority Leader Drew Perkins (R-Casper), a key advocate for the effort.

The firm is a specialist in “turnaround” consulting, according to online descriptions. The consulting giant has done work for several state governments but is perhaps best known for consultancy provided to the now defunct financial services firm Lehman Brothers after the 2008 market crash — work that continues to enrich the firm today.

Still, lawmakers are betting the state has to spend money to save money. Legislators voted to funnel $10 million into a new efficiency account last legislative session. The money is intended for far more than the consultants — some efficiency recommendations require spending to secure savings, such as hiring more auditors and tax collectors to find savings or chase down tax revenue. A&M’s initial report found staffing reductions had left both auditors and collectors understaffed.

Gail Symons, a Sheridan resident and budget hawk who serves on the Government Efficiency Commission, sees potential for big returns for Wyoming. “Maybe we’ll only get two-thirds of the savings because of the political realities,” she said, but “I would be shocked if we don’t come up with at least $150 million in savings.”

Perkins said he asked A&M consultants how much the state could save. The consultants estimated 4 percent of the state’s general fund appropriations, he said. For the current state budget, that would approach $120 million.

A&M is involved in a three-stage effort to help Wyoming, according to comments provided to WyoFile by A&M spokeswoman Sandra Sokoloff on behalf of Erin Covington and John Rust, directors of the firm’s public services division in Washington D.C.

The first step was planning a strategy to make the state more efficient, Sokoloff said. “The next steps are about design and implementation,” Sokoloff wrote. “Our team is supporting a series of work streams to design and develop the plans to transform state government.”

A safer road for campaigners to travel

Outside Cheyenne, the Government Efficiency Commission has become a popular campaign topic for lawmakers and statewide candidates — an example of what the Legislature is doing to reduce state spending in the face of a continuing budget crisis.

Though revenues have improved this year, the state faces looming fiscal challenges. Tax reform to reduce the state’s dependence on volatile energy revenues continues to be a political non-starter. Knocking down the other side of the balance sheet — spending — is increasingly difficult for the State Legislature after years of cuts.

While politicians talked about further cuts during Republican primaries, Mead repeatedly noted that the state budget has shrunk significantly during his eight-year tenure. Agencies have reported increased funding stress to the Joint Appropriations Committee, and said some program cuts have backfired. Other cuts, like the elimination of a $200,000 program for low-income mothers in 2017, are agonizing to debate on the floor, are vulnerable to accusations of cold-hearted budgeting and ultimately do little to right Wyoming’s fiscal ship.

Last year the Legislature found itself unable to make significant cuts to the general government budget, sticking instead to cuts to public schools

Rep. Tyler Lindholm (R-Sundance)

, with even those far below what many lawmakers wanted.

“That’s a lot to do with the fact that we spent the last couple years really going after it and finding all the easy-to-find ones,” said Lindholm, one of only seven lawmakers to vote against the $10 million appropriation for efficiency studies.

“I’ve been part of cutting jobs and wiping out whole programs,” said Lindholm, who has been in the Legislature since 2015. “Those are the things I promised to do and I’ll continue to do them, but you know, that shit ain’t easy.”

With the Legislature stuck seemingly between a rock — raising taxes — and a hard place — finding more programs to cut — a government efficiency project has powerful appeal. The consultants propose to find savings in a way that is less painful to the public, not through cutting services to voters but by finding waste in the system.

What is easily-trimmed “fat” to profit-minded management consultants and what is politically feasible or wise in a state government may differ, however.

Initial findings

A&M first appeared in Wyoming in November, 2016 at the Governor’s Business Forum, an annual must-see for state business leaders and politicians that is put on by the Wyoming Business Alliance and the Wyoming Heritage Foundation. David Javdan, a managing director at the consultancy, pitched the firm’s work in other states at a breakfast meeting and later participated in a panel on “recalibrating” state government.

A few weeks later, then-president of the Wyoming Business Alliance Bill Schilling referenced Javdan’s talk at the forum in a pitch for outside consultants in a Casper Star-Tribune column.

Lawmakers endorsed the idea in the following legislative session, creating the Government Efficiency Commission and setting aside money to hire consultants. The commission, a mix of lawmakers, senior agency personnel and members of the public, selected A&M via a competitive bidding process. At least three firms were considered. For the second contract inked this month, A&M competed in a similar process, this one overseen by the executive branch.

A&M’s initial $300,000 engagement in 2017 produced a 144-page “rapid assessment” report in just a few months. It examined state agencies with annual budgets over $20 million. A&M’s initial conclusions included a finding that the state’s budgeting process encouraged agencies to hold back savings from budgets. The report also found that the state’s “cultural bias” against federal funds is costing it money.

The report shied away from overtly recommending that the Legislature expand Medicaid, which it has repeatedly declined to do. However, it did recommend Wyoming “consider additional Medicaid programs” and gave a variety of examples where taking more advantage of Medicaid funding could save the state money.

The potential savings from A&M’s first report were conditional upon how much money the state was willing to invest in realizing efficiencies. If Wyoming spends $10.9 million, A&M’s low-end option, it could save $111.6 million. Spend $15.7 million, save $225.4 million.

Though many of the recommendations come in thick bureaucratic language, they lean toward suggestions of good corporate governance practices applied to Wyoming’s sprawling state apparatus. “Evaluate opportunities to streamline administrative functions” and “invest in people, process and technology,” are two recommendations in the report’s summary page.

Rep. Andy Schwartz (D-Jackson)

“This is what consultants do,” said Rep. Andy Schwartz (Jackson), the lone Democrat on the House Appropriations Committee. He voted against the $10 million appropriation largely because of the consulting fees, he told WyoFile. “They kind of have a template and I’m always nervous when I see a template because that means it may or may not be tailored to the organization they’re presenting it to.”

Schwartz doesn’t think the state will be done with A&M when the contract runs out next year, he said.

“We’re going to extend it,” he told WyoFile, “because it takes longer than a year to analyze the results of the work they’re doing.”

A&M’s proposal does leave open the option of extending the contract for another two years, with an added “inflation rate adjustment” of 2.5 percent to the hourly rates being charged. The firm is giving the state a discount for the next year’s work, according to communication between A&M and the governor’s office — dropping the total price tag by around $300,000.

Sokoloff disagreed with the suggestion that the firm’s initial report followed a template. “Every recommendation in the report was written specifically for Wyoming based on the observations we made,” she wrote. “It was a collaborative process with the state counterparts, just as the project implementation will be.”

More “thematic observations for improvement in procurement and organization, while also useful for our corporate clients, were based on detailed observations specific to Wyoming,” Sokoloff wrote.

Sokoloff also argued that while “investments take time to materialize,” the firm will be able to adjust its savings projections as it does its work. The estimates will be presented to the Government Efficiency Commission so that the public’s representatives can track results, Sokoloff said.

“Culture change”

On Oct. 9, the Government Efficiency Commission met in Cheyenne to discuss implementation of some of A&M’s initial findings. On the same day, Mary Kay Hill, Mead’s chief of staff, was with an A&M representative signing the firm’s new $1.8 million contract, according to dates on the contract.

Wyoming Administration & Information director Dean Fausset updated the commission on his agency’s progress toward implementing one of A&M’s suggestions — the creation of an organizational chart to map employee to supervisor ratios.

“I never before this chart was created knew how many one-to-ones I had in my agency,” Fausset said. “One supervisor to one employee.”

Overall, Fausset said, some of the changes called for in the rapid assessment would require a “culture change” in agencies. “I think as departments we’re all very comfortable with the way we’re organized now,” he said, “and I think making some of those changes are going to make things very difficult.”

“I would have to admit that the executive branch probably did not do a good job,” tracking supervisor-employee ratios, he said.

Rebecca Bextel, a Jackson resident who runs a registered agent business — filing paperwork to create Wyoming LLCs or corporation and providing other services — opposes the state’s contracting with A&M. She has argued the state should instead pursue “strategic sourcing” — using consultants focused on finding savings through consolidating the state’s purchasing. In particular, she has advocated for one Jackson-based consultant with whom she has a personal connection, Symons told WyoFile.

At the October meeting, Bextel criticized the state’s engagement with A&M, saying it would provide pie-in-the-sky savings suggestions that are difficult to make reality.

“Look at what we have to overcome just for step two,” she said to the commission. “We’re talking about changing the culture of state government.”

“It seems like we’re just adding to the deficit right now,” she concluded.

Supporters eye both short and long term returns

The Legislature didn’t require that the governor’s office outsource the efficiency work to consultants, Perkins said in an interview. The state could have chosen to hire new employees with relevant expertise and put them to work.

To see savings, however, “you have to have the expertise and the people that will eat, drink and sleep this stuff each day,” Perkins said. He is optimistic about the potential from A&M, and about the Legislature’s focus on efficiency on the whole. Though Bextel described the requisite change in culture to state government as an obstacle, Perkins implied that such a broader change was the point of bringing in A&M.

Sokoloff, the firm’s spokesperson, agreed. “The goal is to create a learning environment for the state,” she wrote, and consultants and state employees will work together on each part of the project. “Throughout the life of the program, A&M will provide training and knowledge transfer so that the program can stand on its own,” Sokoloff wrote.

Perkins and Symons both said they think Wyoming will see results within a few years. “There’s a lot of skeptics but I think before the next two years are over we can start seeing savings and that will ensure that this is ongoing,” Symons said.

Perkins agreed. “When the governor’s writing his [or her] next biennial budget is when it will be heard,” he said. Wyoming budgets on a two-year basis, and so the incoming governor will write his or her first budget for the 2020 legislative session.

Next governor’s buy-in will be key

A&M did a similar government efficiency study in Louisiana at the behest of former Gov. Bobby Jindal, in 2014. But the consultant work was seen as an unrealistic political effort and A&M’s reports were shelved after Jindal left office.

With a legislative-driven effort and a commission that incorporates agency heads along with lawmakers and efficiency hawks, Senate Majority Leader Perkins hopes Wyoming’s effort will transition smoothly to the next executive branch.

Senate Majority Leader Drew Perkins (R, SD-29, Casper)

“That’s the pitfall that I have [seen] from the beginning and that we’re trying to avoid by making this a joint effort between the executive and the legislative branches,” he said. “Such a significant part of this has to be led by the [incoming] administration, because there’s no way to legislate what has to be done.”

The two major party candidates jockeying for the governorship have expressed cautious support for the efficiency study and consultants.

Republican candidate and State Treasurer Mark Gordon described Wyoming’s elected officials as “tasked with finding ways to do more with less,” and said “efficiency studies are a key part of achieving this objective.”

When seeking outside help, the state should pursue Wyoming companies first if they have the expertise and background, Gordon said.

“I haven’t had the opportunity to meet with Alvarez & Marsal yet,” Gordon wrote to WyoFile through a spokesperson. “But as I understand it the Legislature picked this firm as the best agency to identify government efficiencies. If their work can deliver hundreds of millions of dollars in savings for Wyoming taxpayers, I think it is a sound return on investment we can all feel good about.”

The next governor will hit the ground with the Project Management Office already in place, though the contract with A&M includes the ability for the state to terminate it. For Gordon, the office must avoid creating more bureaucracy while trying to streamline it, he said.

“If there is value from a centralized project-management office, that is something I am willing to explore,” he said. “Ultimately what we all want to see is efficiency and I don’t think it is imposed by bureaucracy.”

Mary Throne, the Democratic candidate and a former House Minority Floor Leader, said the study includes a topic “near and dear” to her heart that she has long battled with Republican politicians over — Medicaid dollars.

The study noted missed opportunities to use Medicaid dollars in funding some public school programs, and stayed away from the broader opportunity to expand Medicaid funding to more state residents for health care. But Throne said the latter should also be considered an inefficiency. “The same logic should apply,” she said.

As for the use of expensive consultants, Throne said she has been “skeptical from the beginning.”

“I don’t know what a consultant is going to do that good leadership can’t do,” she said. “We can’t outsource the decisions elected officials have to make.”

However, Throne added, the firm could drive the Legislature to spend money. “We have this tendency to be penny wise and pound foolish,” she said. “Meaning we don’t want to spend money to save money. If having an outside consultant helps us change our habits that way so that we truly can save money,” then A&M’s presence in state politics would be a positive, she said.

Throne did not imply she would terminate the consultants. “When you become governor you kind of come into the middle of a book,” she said, “so if there are good parts of something in place and even if maybe you would have approached it differently, it hurts to go backwards.”

Wyoming’s capitol building just before the start of the 2017 Legislative Session. The capitol building remains under construction as the 2019 session and a new governor’s administration approaches. The next governor will choose whether to continue a government efficiency project that includes a $1.8 million contract with outside consultants. (Andrew Graham/WyoFile)

Constitution Party candidate Rex Rammell, on the other hand, would do away with the outside experts and replace them with his own outsider thinking.

“We are perfectly capable of auditing our own departments and making corrections,” Rammell wrote in an email. “What we need is a governor with the backbone to make the necessary corrections. A governor who has allegiance to the people outside of government, instead of within.”

If Rammell becomes governor, the project management office “will not be formed,” he said. “I will manage the efficiency project myself because I believe that is one of the responsibilities of the governor.”

Lawrence Struempf, the Libertarian Party candidate, said he would prefer to do audits internally or use an in-state consulting firm but didn’t suggest he would abolish the project management office outright. If he is elected governor, Struempf said, he wants to establish county-level committees made up of business leaders, educators and other community members to study questions of government efficiency as well as economic diversification.

“It is important to do a kind of audit every once in awhile,” Struempf said, to find the waste he is certain exists in Wyoming’s government. Though he is skeptical of A&M’s price tag, he said, the firm wouldn’t face certain expulsion if Struempf sat in the governor’s chair.

“All of us,” he said, referring to his fellow candidates, “until we see what the contracts are and see it from the inside, we don’t know enough to make absolute decisions.”

Correction: This story has been updated to more accurately characterize the nature of Rebecca Bextel’s business. The original version solely described her enterprise as forming LLCs for out of state clients.

Reader Interactions

Comments

Thank you for a well written and well researched article. (Links particularly informative!)
The tendency to rely on consultants is simply an excuse for legislators’ failure and lack of willingness to grow spines.
Our politicians are not much better than the national bunch; they do not want to make the hard decisions they know full well have to be made. They know: a) traditional sources of income (mining royalties) are declining and b) it is getting more expensive to provide services they must provide (education, roads, law enforcement, etc.) They are hoping to grow the population, but they are unwilling to find the money for the services the current population requires (statewide educational assessments are flat out embarrassing!) These politicians are looking for some outside agency to arrive with a magic wand. It is not going to happen, and our politicians just pissed away another couple million. I say replace every incumbent on the ballot with a new face and repeat until the message is delivered. Get a spine and do your job

I think overall this is a good article and I know it took Andrew a lot of time to research this and put it together, but I’ve been referenced three different times and I have a few issues regarding them.

1. My actual quote regarding Mr Faucet’s report recap was that for step one to be implemented before step two, we will need to educate legislators, pass legislation, people will need to retire, we will need to keep momentum going through multiple future governors, and we will need to change the culture of state government. Yes, this will all need to happen for just ONE of A&M’s $300,000 findings to be implemented before their $1.8 million report takes place.
2. Why the quote from Ms Symons sayings I am pushing strategic sourcing? I have been 100% against this A & M report after thoroughly researching what happened in other states. What does strategic sourcing have to do with wasting millions of dollars and years of time on this A & M report? Maybe you could have addressed my actual issues with THIS report instead of dodging to something else not relevant.
3. I don’t understand why it says that I register LLC’s for people outside the state. Andrew never asked me about this and I have many customers who live INSIDE Wyoming. The sentence just seems a little misleading. Had I been asked about it I could have clarified.

My concern is seeing a short list of firms than can do this basket of services , and ask if any of them were consulted by Wyoming leadership about consulting Wyoming government. How was Alvarez and Marsal determined to recieve what appears to be a sole source noncompetitive unbid contract for services? Any other contendors we need to hear about that were bandied about and found wanting, until only one consultancy firm was left standing ? Or might it be a matter that the corpus of the Wyoming economy is so vaccuous and state government so spartan , overlaid on a nearly deserted landscape with no major metropolitan area and a general dearth of diversity , that only this one consulatancy showed any interest at all in helping Wyoming come into the 21st century . Maybe the others were ferreting out possible more promising contracts in places like Mongolia , or the Solomon Islands …

This I do know. Alvarez and Marsal has a shaded reputation of generously padding its own pockets as it dismantles and restructures it’s clients. Two cases in point: A & M ” restructured” the Arhthur J Andersen firm after if fell into ruins because it was the consultancy assisting the mighty Enron. They also swooped in to rescue the Lehman Brothers investment bank during the financial collapse that began ten years ago. Lehman was the 4th largest investment bank in America, but now is nonexistent, having fallen from a $ 600 billion house to… nothing much beyond a pile of lawsuits still being settled. Lehman was not bailed out by the government, just divested. Alvarez & Marsal came away with $ 500 million in consultancy fees on that. Not a bad decade’s work picking over carcasses…

It would have been better for Wyoming if this process was more transparent and there were a robust slate of consultancy candidates to consider. How would we know ? First I’ve heard of it… Sounds like I’m not alone in that. I read this article with the greatest of skepticism, as far as it goes.

I already found three ways to save money. 1- a shiney building doesn’t say we are a great government, wonderful state. Happy, healthy citizens do. 2- Don’t pay these so called consultants for a job costing more than they need, more than they’ll save, and full of crap, 3- get the money back for that expensive, and quite honestly stupid, University logo (they could have had a low cost contest with the students for a new logo, not spend millions on people in Colorado). Granted that is not exactly state monies but they do get funding from the state, not just students.